Auditor independence

In order to safeguard the auditor’s independence and objectivity, Barclays has in place a policy setting out the circumstances in which the auditor may be engaged to provide services other than those covered by the Group audit.

The Policy applies to all Barclays’ subsidiaries and other material entities over which Barclays has significant influence. The core principle of the Policy is that non-audit services (other than those legally required to be carried out by the Group’s auditor) should only be performed by the auditor in certain controlled circumstances. The Policy sets out those types of services that are strictly prohibited and those that are allowable in principle. Any service types that do not fall within either list are considered by the Committee Chair on a case-by-case basis, supported by a risk assessment provided by management.

The Policy is reviewed on an annual basis to ensure that it is fit for purpose, and that it reflects applicable rules and guidelines.

The Policy is also aligned with KPMG’s own internal policy on non-audit services for FTSE 350 companies which broadly restricts non-audit work to services that are ‘closely related’ to the audit.

Any changes to the Policy are approved at a Group level by the Committee. This is in accordance with European Union law and FRC guidance, pursuant to which audit committees of Public Interest Entities (such as Barclays) are required to approve non-audit services provided by their auditors to such entities, and subsidiary Public Interest Entities in the UK – such as BBUKPLC and BBPLC – can rely on the approval of non-audit services by the ultimate parent’s audit committee. It should be noted that audit services, and the fee cap, will also be monitored by the relevant audit committee, as appropriate.

Under the Policy, the Committee has pre‑approved all allowable services for which fees are less than £100,000. However, all proposed work, regardless of the fees, must be sponsored by a senior executive and recorded on a centralised online system, with a detailed explanation of the clear commercial benefit arising from engaging the auditor over other potential service providers. The audit engagement partner must also confirm that the engagement has been approved in accordance with the auditor’s own internal ethical standards and does not pose any threat to the auditor’s independence or objectivity. All requests to engage the auditor are assessed by independent management before work can commence. Requests for allowable service types in respect of which the fees are expected to meet or exceed the above threshold must be approved by the Chair of the Committee before work is permitted to begin. Services where the fees are expected to be £250,000 or higher must be approved by the Committee as a whole. All expenses and disbursements must be included in the fees calculation.

During 2019, all engagements where expected fees met or exceeded the above threshold were evaluated by either the Committee Chair or the Committee as a whole who, before confirming any approval, assured themselves that there was justifiable reason for engaging the auditor and that its independence and objectivity would not be threatened. No requests to use KPMG were declined by the Committee in 2019 (2018: none). On a quarterly basis, the Committee reviewed details of individually approved and pre‑approved services undertaken by KPMG in order to satisfy itself that they posed no risk to independence, either in isolation or on an aggregated basis.

For the purposes of the Policy, the Committee has determined that any pre-approved service of a value of under £50,000 is to be regarded as trivial in terms of its impact on Barclays’ financial statements and requires the Group Financial Controller to specifically review and confirm to the Committee that any pre‑approved service with a value of £50,000-£100,000 may be regarded as such. The Committee undertook a review of pre-approved services at its meeting in December 2019 and satisfied itself that such pre-approved services were trivial in the context of their impact on the financial statements.

The fees payable to KPMG for the year ended 31 December 2019 amounted to £56m, of which £11m (2018: £11m) was payable in respect of non-audit services. A breakdown of the fees payable to the auditor for statutory audit and non-audit work can be found in Note 40. Of the £11m of non-audit services provided by KPMG during 2019, the significant categories of engagement, i.e. services where the fees amounted to more than £500,000, included:

  • audit-related services: services in connection with CASS audits
  • other services in connection with regulatory, compliance and internal control reports and audit procedures, required by law or regulation to be provided by the statutory auditor
  • other attest and assurance services, such as ongoing attestation and assurance services for treasury and capital markets transactions to meet regulatory requirements, including regular reporting obligations and verification reports.

An external audit tender was conducted in 2015 and the decision was made to appoint KPMG as Barclays’ external auditor with effect from the 2017 financial year, with PwC resigning as the Group’s statutory auditor at the conclusion of the 2016 audit.

Barclays is in compliance with the requirements of The Statutory Audit Services for Large Companies Market Investigation (Mandatory Use of Competitive Tender Processes and Audit Committee Responsibilities) Order 2014, which relates to the frequency and governance of tenders for the appointment of the external auditor and the setting of a policy on the provision of non-audit services.

Provided that KPMG continue to maintain their independence and objectivity, and the Committee remains satisfied with their performance, the Group has no intention of appointing an alternative external auditor before the end of the current required period of 10 years.

Details of the services that are prohibited and allowable are set out below

Services that are prohibited include:

  • Bookkeeping
  • Design and implementation of financial information systems
  • Design and implementation of internal control or risk management services related to financial information
  • *Appraisal or valuation services
  • Fairness opinions or contribution-in-kind reports
  • *Actuarial services
  • Internal audit
  • Management and Human Resources functions
  • Broker or dealer, investment advisor or investment banking services
  • Legal, expert and certain *tax services or personal services to persons in a financial reporting role
  • Transaction-related and restructuring services.

*these may be permissible subject to compliance with certain requirements. 

Allowable services that the Board Audit Committee considers for approval include:

  • Statutory audit and audit related services and regulatory non-audit services
  • Other attest and assurance services
  • Training, surveys and software
  • Risk management and controls advice
  • Transaction support
  • Tax compliance services
  • Business support and recoveries
  • Translation services.